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in Chicago and one in Minneapolis. It classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company's most recent year is given below: Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income Office Chicago Total Company $450,000 100% $150,000 100% $300,000 100% 225,000 50% 45,000 30% 180,000 60% 225,000 50% 105,000 70% 120,000 40% 126,000 28% 52% 48,000 16% 99,000 78,000 22% $ 27,000 14% 18% $ 72,000 24% 63,000 $36,000 8% minneapolis Required: 1. Compute the companywide break-even point in dollar sales. Also, compute the break-even point for the Chicago office and for the Minneapolis office. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points? Why? 2. How much would the company's net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns. 3. Refer to the original data. Assume sales in Chicago increase by $50,000 next year and sales in Minneapolis and all fixed costs remain unchanged. a. Prepare a new segmented income statement for the company using the above format. Show both amounts and percentages. b. Compare the income statement you prepared in requirement 3a to the original data. Did the Chicago office's contribution margin ratio change? Why? Did its segment margin ratio change? Why?

in Chicago and one in Minneapolis. It classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company's most recent year is given below: Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income Office Chicago Total Company $450,000 100% $150,000 100% $300,000 100% 225,000 50% 45,000 30% 180,000 60% 225,000 50% 105,000 70% 120,000 40% 126,000 28% 52% 48,000 16% 99,000 78,000 22% $ 27,000 14% 18% $ 72,000 24% 63,000 $36,000 8% minneapolis Required: 1. Compute the companywide break-even point in dollar sales. Also, compute the break-even point for the Chicago office and for the Minneapolis office. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points? Why? 2. How much would the company's net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns. 3. Refer to the original data. Assume sales in Chicago increase by $50,000 next year and sales in Minneapolis and all fixed costs remain unchanged. a. Prepare a new segmented income statement for the company using the above format. Show both amounts and percentages. b. Compare the income statement you prepared in requirement 3a to the original data. Did the Chicago office's contribution margin ratio change? Why? Did its segment margin ratio change? Why?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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04 .

in Chicago and one in Minneapolis. It classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company's most recent year is given below: Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income Total Company $450,000 100% 225,000 50% 225,000 50% 126,000 28% 99,000 22% 63,000 14% $36,000 8% Chicago Office minneapolis $150,000 100% $300,000 30% 180,000 45,000 105,000 78,000 $ 27,000 70% 52% 18% $ 72,000 120,000 48,000 100% 60% 40% 16% 24% Required: 1. Compute the companywide break-even point in dollar sales. Also, compute the break-even point for the Chicago office and for the Minneapolis office. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points? Why? 2. How much would the company's net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns. 3. Refer to the original data. Assume sales in Chicago increase by $50,000 next year and sales in Minneapolis and all fixed costs remain unchanged. a. Prepare a new segmented income statement for the company using the above format. Show both amounts and percentages. b. Compare the income statement you prepared in requirement 3a to the original data. Did the Chicago office's contribution margin ratio change? Why? Did its segment margin ratio change? Why?
Transcribed Image Text:in Chicago and one in Minneapolis. It classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company's most recent year is given below: Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income Total Company $450,000 100% 225,000 50% 225,000 50% 126,000 28% 99,000 22% 63,000 14% $36,000 8% Chicago Office minneapolis $150,000 100% $300,000 30% 180,000 45,000 105,000 78,000 $ 27,000 70% 52% 18% $ 72,000 120,000 48,000 100% 60% 40% 16% 24% Required: 1. Compute the companywide break-even point in dollar sales. Also, compute the break-even point for the Chicago office and for the Minneapolis office. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points? Why? 2. How much would the company's net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns. 3. Refer to the original data. Assume sales in Chicago increase by $50,000 next year and sales in Minneapolis and all fixed costs remain unchanged. a. Prepare a new segmented income statement for the company using the above format. Show both amounts and percentages. b. Compare the income statement you prepared in requirement 3a to the original data. Did the Chicago office's contribution margin ratio change? Why? Did its segment margin ratio change? Why?
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